Prudential DC Feature Guarantees Lifetime Paycheck

According to a Prudential press release, with IncomeFlex, participants can elect to transfer all or a portion of their DC plan assets into one of five investment funds, ranging from conservative to aggressive. Each fund has a “market value’ that fluctuates with performance as the participant builds an “income base’ that provides the foundation for a guaranteed lifetime paycheck. Prudential IncomeFlex funds are separate accounts available under group variable annuity contracts issued by Prudential Retirement Insurance and Annuity Company (PRIAC).

The feature offers a guaranteed yearly paycheck for life, even if the participant’s account balance becomes depleted.Beginning at age 50 – and continuing to the time a lifetime paycheck amount is locked in (up to age 70) – participants are guaranteed their income base will grow at an annualized minimum of 5%, the release said. Starting at age 65, participants can withdraw paychecks equal to 5% of their IncomeFlex income base, or they may elect to withdraw paychecks at age 55 equal to 4% of the income base for life. If strong market performance causes the participant’s account balance to exceed the income base, the future lifetime paycheck could increase. Participants can also opt to have their income continue for their spouse.

Participants can take advantage of yearly performance gains calculated on their birthday. The basis for the guaranteed retirement paycheck would be the highest of three possible values: the 5% guaranteed growth value based on net contributions; the highest birthday value; or the market value of the participant’s account. Participants can move out of the IncomeFlex fund at any time without withdrawal fees, the company explained.

Additionally, participants can withdraw more or less than their guaranteed amount during retirement; however, withdrawals in excess of the guaranteed amount will reduce future guaranteed withdrawal amounts. They can pass along any remaining market value in their account to their beneficiaries.